We have found that T cell receptor (TCR) expression and function in developing thymocytes is actively regulated by CD4-mediated signals generated by the interaction of CD4 with Ia+ thymic epithelium. CD4 molecules on the surface of CD4+CD8+ thymocytes are engaged in situ by Ia+ thymic epithelium and transduce intracellular signals that result in: (i) low TCR expression, (ii) tyrosine phosphorylation of TCR-zeta chains, and (iii) inability of TCR cross-linking to induce intracellular calcium flux. Release from these intra-thymically generated inhibitory CD4 signals results in increased TCR expression, dephosphorylation of TCR-zeta chains, and improved TCR signaling. Further, we have found that the molecular basis for low TCR expression in developing CD4+CD8+ thymocytes is a high rate of degradation of newly synthesized and assembled TCR complexes, and that CD4 mediated signals regulate the TCR degradation rate in CD4+CD8+ thymocytes.